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the first line said that what we need to calculate. This is about option pricing model binomial tree.

For hint, use the photo added tight now.

Use a binomial tree to price the following Arrow-Debreu security. It pays $1 if the stock price at time T = 0.5 is between to $39.5 and $40.5 and zero otherwise. Today's stock price is equal to $40. At each time the stock price can either go up or down. If it goes up, it is multiplied by u = 1.1. If it goes down, it is multiplied by d=1/u. The time-step is At = 0.125, and the risk-free interest rate is equal to 5%. the time-step was a lo generaline the model to a different Al, observe that the value at time af of $1 inwested in the money market account at time ero) is equal to 1+TA. Hint: the time-step was At = 1. To generalize the model to a different At, observe that the value at time At of $1 invested in the money market account (at time zero) is equal to 1+rAt